The promise that precious metals have in the trade market may be traced back to their many uses and their status throughout history. Precious metals, specifically gold and silver, were once used as currency in a lot of developed civilizations. Their value is now carried over to the recent times and although they are no longer used as currency, they still remains a status of wealth. This may also be the reason why precious metals have remained popular in the trade and commodity market and are pursued aggressively by investors.
A lot of investors have recognized the potential of precious metals primarily because of their rarity and their uses. Aside from being the chief component in jewelry production, the demand for precious metals in a lot of industries has steadily increased through the years. More so, the increased demand has a direct impact on trade in the commodity market.
Precious metals traded in commodity markets come in bulk and are known as bullions. These bullions may be cast into ingots or more commonly referred to as bars, or may be minted into coins, and come in a variety of values. The value of bullions, on the other hand is based on their mass and purity.
Gold, being a medium of exchange and its quality to be exchanged for money are the essential factors that contribute to its demand in the commodity market. Sixty percent of the demand for gold is accounted to its decorative uses as jewelry and art. This is only possible if gold is combined with other less expensive metals such as copper or nickel. Considerably, pure gold is also very difficult to handle owing to its softness. The recent years has seen the importance of gold in the electronic industry and are used in the production of semi-conductors in computer chips. The dental and medical industries also use gold in some of their devices.
Silver, on the other hand is more sought after than gold based on its industrial uses. Silver is a better heat and electricity conductor than copper. However, since silver may be recycled and is more plentiful than gold, it commands a lower price than gold in the commodity market.
The value that precious metals fetch in the commodity market has remained more stable than other commodities owing to their uniqueness and the fact that they cannot be substituted just yet.